Options Trading Strategies: Long Condor Puts

A long condor spread with puts is a four legged strategy, and is created by buying one Out of The Money put at a lowest strike price, selling one Out of The Money put with a higher strike price, selling another In The Money put with an even higher strike price, and buying one more In The Money put with a highest strike price. All puts are with a same expiration date and there is an equal distance between wing strikes .

A long condor spread with puts is identical to the long condor with calls, only instead of calls it uses puts, and the opposite to the short condor with puts strategy.

You can look at a short condor spread with puts as a combination of an Out of The Money bull put spread (at the higher strikes) and an In The Money bear put spread (at the lower strikes).

When to use this strategy?

You are neutral on the market movement and bearish on the volatility, so you expect a minimal BTC/ETH price change in the specified time and looking to execute a good risk/reward ratio trade at a low cost.

Below is a Profit and Loss chart example of a long condor with calls options strategy:

Pros:

Maximum loss is capped and low. The profitable area is wider than that of the long butterfly with puts.

Cons:

The higher profit potential requires a narrow range between the wing strikes, which shortens the spread and lowers a maximum profit probability.

Example:

In this example, BTC is trading at 38,366.77 USD, and you expect its price to moderately move in either direction. You have bought an OTM put with a strike price of 36,000.00 USD, and sold an OTM put with with a strike price of 37,000.00 USD, sold an ITM put with a strike price of 39,000.00 USD, and bought an ITM putwith a strike price of 40,000.00 USD, all with an expiration date of February 11^th 2022.

As this is a debit spread, and the long puts costs you more than a premium from the short puts you have paida net premium of 370.63 USD, which is also your max loss.

The Profit and Loss chart is given below:

Upon expiration:

If the BTC price is below the lowest strike price, it results in maximum loss.

If the BTC price is above the lowest strike and at or below the OTM short put strike, you are in the profit if the BTC price is above the first break even.

If the BTC price is above the ITM short call strike and at or below the highest strike, you are in the profit if the BTC price is below the second break even.

If the BTC price is above the highest strike, then the strategy is resulting again in the maximum loss.

Your maximum gain is when the BTC price ends up between the two short put strikes (middle strikes) and equals the difference between adjacent wing strikes minus the net premium.

BTC at Expiry (USD)	Payoff (USD)
36,000.00 (strike price LP OTM)	-370.63 (max loss)
36,117.00	-197.63
36,370.63 (break even 1)	0
36,658.00	+287.37
37,000.00 & 39,000.00 (SP OTM, SP ITM)	+629.37 (max gain is between strikes)
39,349.00	+280.37
39,629.37 (break even 2)	0
39,832.00	-202.63
40,000.00 (strike price LP ITM)	-370.63 (max loss)